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Exit Backlog: What Alternatives To The Traffic Jams?
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00:00Bonjour, tout le monde.
00:02C'est ce panel qui concerne l'exit backlog et les choses et les alternatives
00:08pour les trafic jams que nous voyons dans l'Europe,
00:12et les USA et l'Asie aussi.
00:15Aujourd'hui, je suis en train de Jaja, Henry et JD.
00:18Nous sommes dans un autre ordre de la ligne, mais c'est ok,
00:21nous allons travailler avec ça.
00:22Je vais vous donner un petit introduction et nous allons passer
00:25à la discussion.
00:25Jaja, je vais vous donner.
00:27Jaja, je vais vous donner.
00:29Je suis le capital entre 22 손가락 pour l'innovation.
00:31Nous sommes une élite en France, B.C.
00:33fonds en New York.
00:35Nous sommes invests dans le premier städage actuellement
00:39au B2B-SAS, en ligne entre fréquence comme la L'industrie,
00:43la chaine, d'aller-ciel, et bien sûr, l'AI.
00:47La unique chose dont notre fondation est notre idéal
00:50est le public global management, le PE.
00:52C'est pourquoi nous avons ces catégories que nous sommes investis
00:57because our entire fund thesis is to help our companies go to market via these PE portfolio companies
01:04and help them find their first enterprise customer.
01:07So, that's me.
01:09Hi, I'm JD. I'm a managing partner at Iris.
01:12Iris is a pan-European venture and growth fund.
01:15So, one, we focus on very vertical tech assets that can become infrastructures of the market.
01:21So, shift technology, AI for fraud detection in the insurance space,
01:25exotech, robotics in the logistics space, Kiriba, cloud that transformed the way we operated cash management in large companies,
01:33sold 3.2 billion last year.
01:35We really dedicate ourselves to a thesis that is very tech vertical that can become a major infrastructure of the
01:41market.
01:42We do that either in venture.
01:44We have a 120 million fund dedicated to France and DAF or a growth where we cover with 500 million
01:51throughout Europe.
01:52and we're basically based out of Berlin, Munich, and Paris, which for us is an excellent hub in terms of
01:58scale, technology, and covering Europe.
02:03Henry John, president and managing partner of Hermitage Capital.
02:07We're Hong Kong headquartered a global tech fund.
02:10AUM, about a billion and a half, with global mandate.
02:13So, we invest in Asia, US, and also here in Europe.
02:17Before, you know, co-funding Hermitage Capital, I was an investment banker for over a decade, was Morgan Stanley and
02:24JP Morgan.
02:24So, a lot of my partners came from similar backgrounds.
02:27So, we do have a global perspective and also very good at connecting dots across different regions.
02:33Because back then, I was, you know, head of Asia Industrials and Technologies when I was at Morgan Stanley.
02:38So, we did a lot of cross-border M&As between US, Europe, and Asia.
02:42Great. Thank you all.
02:43So, moving on to the exit environment.
02:45And I've got a few stats here that we've pulled from some of the data that we published in some
02:49of our reports.
02:50So, average over the past decade has been around about 30 to 60 billion exited capital from European VC-backed
02:57companies.
02:58That jumped to 183 billion in 2021.
03:01So, a ridiculous amount of capital was exited then.
03:04Fast forward to 2024.
03:05Last year, it was 61 billion.
03:08And so far this year in Q1, it's 11 billion.
03:11So, we're slower than last year.
03:12We're way below 2021.
03:14Now, 2021 probably was an outlier.
03:16But, J.D., I'll kick things to you first.
03:19What is your current take on the exit backlog in Europe?
03:23Number one, there's no public exits.
03:25The ones that you have go to the U.S., much more liquidity.
03:29It's kind of rare.
03:29Probably seen it.
03:31I just believe last year and actually was taken out of quotation.
03:34So, public markets are a limitation.
03:37But that's not the issue.
03:38The issue is, I think there's plenty of room for exits.
03:41There's a lot of PEs.
03:42Tech buyout, people looking for software that's very healthy.
03:47The problem is the quality of the assets.
03:49At IRIS, I'm not trying to be braggy, but the point is we've had a lot of exits over the
03:54past two years, especially with PEs.
03:56We've exited Lumaf, 650 million.
03:59We've exited Kariba, 3.2 billion.
04:02Or BrainCube last week, sure pair with Carlyde.
04:05PEs is actually very acquisitive when it comes down to B2B software, well-developed, stabilized teams, dedicated to growth and
04:13showing profitability.
04:14So, the point is you need to be able to have these pointers.
04:19The market for exit is as demanding, if not more demanding than ever.
04:23And the thing is we're still relying on 2021 valuations.
04:27So, we promised big returns, billions of valuations.
04:31So, what happens in the public markets in the U.S. is ineluctables.
04:35You put them on IPO.
04:36This is the market price.
04:37Thank you.
04:38On a private market, there's a temptation to say, I could perhaps do better.
04:43So, I think there's a selectivity of the exits, although I still think the market is there.
04:48But I think there's a real question about our industry of financers around the table.
04:53How much are we willing to exit and provide returns to our LPs, as opposed to say, well, we told
04:59you it was worth $3 billion, but you know what?
05:01It's going to be one.
05:02So, I think there are plenty of structural issues inherited from what we've done in the past few years that
05:08will question and challenge the way we operate our business today.
05:12Interesting.
05:13And you mentioned the U.S. there briefly.
05:15Jar Jar, I'll bring the kind of conversation to you now.
05:17And how are U.S. investors approaching European assets?
05:21Is it an opportunity?
05:22Is it a red flag?
05:23Is there a correction due, or is that correction already taking place?
05:27Definitely not a red flag, otherwise we wouldn't be here.
05:29But I think that for us, especially on the early stage side of things, what we're investing at, which is
05:34pre-CNC, so very, very early on, we have traditionally and are still seeing a big price arbitrage investing in
05:44European companies.
05:45And, you know, that's not for lack of talent or anything, but it's really because just compared to prices that
05:53we're seeing in Silicon Valley and even New York City, they're just much, much lower on teams that are just
05:59as talented and can hack the distribution if they get a chance.
06:04And so, you know, we haven't primarily been a very European-focused fund.
06:10But opportunistically, we will look at select investments at pre-CNC based in Europe.
06:17And, you know, actually one of our portfolio companies is here right now, you know, in the audience.
06:23And so we are looking more and more, and obviously we've looked at Israel as well.
06:28We've had a hand and cool companies there.
06:30And so I would say as a U.S. early-stage investor, you know, we're not screening per se for
06:39European assets, but we definitely see a lot of benefits towards investing in the region.
06:45For sure.
06:45And Henry, coming to you, we've talked a bit about the PE kind of angle and the PE landscape there.
06:52From the late-stage PE standpoint, looking at Europe from Asia or just generally, you know, PE and exits in
06:58VC, how is the lack of liquidity impacting your kind of workflow?
07:02Sure, that's a good question.
07:04I think Hong Kong market year-to-day has been performing really well.
07:07It's probably one of the bright spots globally if you look at PE exits.
07:11So for us, over the last seven, eight years since we were founded in 2017, we have 10 successful exits
07:17already out of our 30 portfolio companies.
07:19And out of the 10, nine is through IPOs in both U.S. and also Hong Kong market.
07:25And one through M&A actually announced earlier this week.
07:28So I would say it's really, you know, specific to the region because in Asia, I think a lot of
07:32corporates don't have the habit of acquiring and paying like a billion dollars for smaller startups.
07:38Rather, they just poke the team.
07:40So it's actually easier or actually better providing higher certainty to access through IPOs.
07:46But given our background, you know, one of our investment criteria is whether the underlying business is IPO-able, which
07:53is something we have a lot of expertise in.
07:56And year-to-day, because of DeepSeek triggered a lot of the revaluation of the Asian tech companies, we're fortunate.
08:02The market has been really good.
08:04Two of our portfolio companies, Horizon and also XTelPi, both did really well.
08:09Horizon rise about, you know, 100% year-to-date in the secondary market.
08:13And I actually brought in one of the French conglomerate, CMA-CGM, which is the largest shipping and logistic company.
08:22Rudolf Sade is a friend of mine.
08:24They came as part of the IPO in Hong Kong as an anchor investor.
08:28I'm sure they're very happy sitting on 100% return year-to-date.
08:31And the other one is XTelPi, which is a Boston-originated drug discovery company using AI technology, working with Pfizer,
08:39Johnson & Johnson, to basically speed up the R&D for big pharma companies.
08:44That company is also doing pretty well year-to-date.
08:48So I would say it's really region-specific.
08:50And so far, I think Asia has been doing okay from an exit standpoint.
08:54I would agree.
08:55I think at the moment, it's a mixed bag across regions and sectors, right?
08:58We're seeing certain sectors boom in terms of deployment and opportunities in other sectors have potentially soured post-COVID-19.
09:05That's what we're kind of seeing in our data.
09:07And it's kind of understanding that shift.
09:08And is it a near-term shift?
09:09Is it a blip?
09:10Is it a long-term structural change?
09:11So that's good to hear that sentiment.
09:14So moving on to that topic of opportunities within sectors and regions.
09:19And J.D., I'll ask you the first question here.
09:22It's kind of, I guess, talking about your portfolio companies, how are they reacting to potentially longer capital runways, longer
09:28exit horizons?
09:30Are you seeing a change in the hiring strategy or cap table pressure?
09:35Of course.
09:37Think about that.
09:38The latest unicorn rounds in France for many were 2021-22.
09:44So they've been running on that money since.
09:47And that's a great thing.
09:48At first, they thought they'd go ambitious.
09:51But the thing is, the average growth rate over the past three years in Europe has gone down from 300%,
09:58200% that you could see in companies to right now, if you get 60%, 80%, you're a top performer
10:04in your class.
10:05So the average growth rate has been delayed, has slowed down.
10:09And at the same time, the valuations we've taken with the fall of the average multiple valuation has made it
10:15so that each euro you spend for growth is actually dividing your money by two or four, because multiples were
10:23divided by four.
10:25So the maths make it so that companies have had to apprehend the fact that they would not go back
10:30to the market, that it would go slower, and they had to figure out a way to generate value.
10:35So number one, you reduce your burn.
10:38You can still invest in innovation.
10:40The fact is, either you're very young, and it's going to be long, so you've got to make your choices
10:44and see if your market adopts.
10:45Either your bigger shift technology is huge, it's more than 100 million contract, Exotec is huge, you've still got a
10:52long way to go.
10:53So you've got to be more profitable, show that your products make sense for your customers.
10:58And so you're selling more, trying to upsell, not hiring 100 or 200 people as you expected.
11:04You've got enough data scientists, and guess what?
11:07You're still growing.
11:08You're taking a real ownership of your market, and you're starting to show you can be profitable.
11:14So for me, they've been adapting.
11:17It's been more challenging for early-stage companies that raised circa 20 to 23, took twice the valuations they should
11:24have.
11:25But even these companies have either gone on with the money, adapted their rate.
11:29That's been the case in our portfolio.
11:31Or they went crazy and had to do a bridge or realized that the market was not interested.
11:36So overall, yes, profile of companies has changed, most of it for the best, some of it for figuring out
11:45that it was not meant to be that way they expected.
11:48Yeah, really interesting.
11:50I think when we touched on that point about hiring, it reminded me of a sentiment that the founder of
11:55PitchBook, he's left now last year,
11:56but one of his key phrases was, more companies die of indigestion rather than starvation, which I think is a
12:03very, very good saying
12:04and something we can definitely take on board across private capital markets.
12:08There's a lot of indigestion within it.
12:11Thank you for that.
12:12I mean, if there was one thing I'd like people to leave the audience with is that historically, I've been
12:18in VC for 12 years.
12:19We've been at it for 40 years, less money has always been much more beneficiary to startups and innovation than
12:28way too much money.
12:30That's an obvious role.
12:32You don't hire faster because you've got 10 times the amount.
12:36That's not happening.
12:37Yeah, and also, like, as an early stage investor, it's funny because, like, a few years ago, you would listen
12:42to these startup pitches at, you know, Seed Series A,
12:45and they would boast about, like, we have X amount of people working here, it's so great, and nowadays, you
12:50know, you hear these pitches where it's like, you know,
12:52we're at X mill and ARR, and we're only, like, three people, you know, so it's a completely different shift
12:59in how they're pitching, like, team composition, like, team size these days.
13:03Sure, I think, yeah, that's a great point as well is the number of employees versus ARR.
13:10Yeah.
13:10It's a huge beneficial kind of metric, and also, looking from the U.S. perspective, I guess, Jar Jar, back
13:16to you,
13:17is there anything you're seeing more at the early stage in terms of opportunities, sectors that are potentially slightly different
13:24on the exit horizons
13:25or capital runways that you could maybe point towards in the U.S.?
13:28I think that in the U.S., like, BBSAS is probably still, where we're investing, still seeing as, like, relatively
13:36quick exit horizons
13:37compared to, like, other sectors we're looking at, like, healthcare industrials, where we recognize that, you know,
13:43perhaps these companies will inevitably just burn more cash to get to maybe the same revenue in multiples,
13:49but at the same time, because of the structures of the sectors, they do have deeper modes.
13:55They're, like, not as hard to displace if anyone else comes into the picture,
13:59and so I think that you do still have to look at different sectors from different lenses
14:05and apply, you know, very different ways of valuing these businesses,
14:10especially as they grow into, like, A, B, C rounds.
14:14And, Henry, we've talked a little bit about portfolio companies just now.
14:17What are LPs telling you?
14:19Are there any capital allocation shifts due to these potentially longer funding runways, exit horizons?
14:24Are they getting itchy?
14:26Are they getting a bit nervous about the distributions coming back?
14:29I think, really, again, it's very region-specific.
14:32I think our investment in the U.S., all the unicorns in the AI space, they're very liquid, actually.
14:38So if you're any given day and time, you want to ask your position in certain superstar unicorns,
14:43you can always find a secondary buyer.
14:45It's very liquid.
14:46There's a lot of platforms doing it.
14:48So I don't see a reason to be concerned from that perspective.
14:52But I think, overall, the valuation is kind of reverse correlated with interest rate.
14:56And given the higher interest rate environment right now, I think the valuation, especially for the pre-revenue companies, tech
15:02companies, are facing challenges.
15:04But that's precisely, I think, where we see some of the opportunity lies, right?
15:07A lot of those companies, if you look at the past three or four years, the revenue and also R
15:12&D has come a long way, achieving a lot of milestones.
15:15But the valuation of kind of being flat or even downrun, I think that's a good chance to actually get
15:20into those opportunities from a growth stage investor perspective.
15:23As long as you manage to make sure there's sufficient cash runway, that the company doesn't burn out of cash,
15:29or find a way to get them public.
15:32Because right now, it's a lot easier to raise capital in the secondary market versus primary market.
15:37If you look at U.S., you know, per se, U.S., there hasn't been really a tech major IPO
15:44in the last two years, right?
15:46You know, Kalana recently pulled from their NYSE listing.
15:51But having said that, I mean, U.S. share price has been all-time high.
15:55So a lot of secondary market investors are very active, looking for a company to invest in.
16:00So what I would advise to our funders is try to find a way to get listed.
16:05And it's a lot easier to raise from the secondary market through full-on offerings than just struggling in the
16:11primary market.
16:12Same thing goes to all the funders in Asia and also U.S.
16:17The way we find a provide access solution is I'm actually one of the sponsors just issued a spec in
16:24the U.S., NYSE, last month, and trying to provide liquidity.
16:27And surprisingly, we got inbound inquiries from, you know, companies all around the world, from quantum computing companies to OnlyFans.
16:36So it's actually pretty interesting, right, to see a diversity of different companies trying to look for capital market solutions.
16:45OnlyFans is a company that has a very, very low employee count and a very high RRR.
16:50Like, it's crazy. It's always top of the chart.
16:52It's insane. It's a great business to kind of invest in and we'll exit eventually at a very high valuation.
17:00So moving back to JD, any kind of standout sectors that you think might break the logjam?
17:08Any particular companies or regions that you might think, you know, okay, this might be the area to maybe click
17:14first and rebound?
17:18I wish I had the perfect answer, AI, France.
17:22The thing is, we're all operating through thesis.
17:26My thesis right now is the world's going to shit.
17:30Health care in France right now is under a lot of jurists.
17:34We used to have the best system in the world, hospitals.
17:37Since the COVID, my wife's a doctor, people are leaving the hospital.
17:41There's less and less medical workers.
17:44Doctors are being poorly paid and not recovering from the COVID stress.
17:49So infrastructures, this is health care.
17:52It's going down.
17:53And the truth is, patients have data right now in this room.
17:56They all have smartphones.
17:58I have a Whoop.
17:59You can have an Apple Watch.
18:00This is an obvious match, and yet it will take time.
18:04It's hard, but it's going to happen because we're losing about, what, 18 billion a year out of Social Security.
18:11So health care is a bet, but sorry, this is not going to make you rich in the next two
18:15years.
18:16It's going to take five years.
18:17It's going to take a change of conundrum.
18:20Logistics.
18:20We did ExoTech in 2018.
18:22It's now a huge company, and yet I'm not considering exiting that company before a couple of years.
18:29AutoStore made an amazing IPO three years ago, and now the market's under challenge because retail's slowed down, inflation's high.
18:37These waves are going to pass, and guess what?
18:39We're still going to buy more and more online.
18:42We're going to automate more.
18:43Work's going to change.
18:44So my answer is this.
18:46You look at infrastructures, and you think it's working shit.
18:50This is your next place of investment, but be patient.
18:54There's no, hey, invest today, make money tomorrow.
18:57There's choose your space.
18:59Choose good assets.
19:01Be careful as to how you develop them.
19:03If you develop them well, there's going to be worth something.
19:06Is it 3x?
19:07Is it 10x?
19:08Right now, with money, I've got no clue.
19:10But that's our thesis.
19:11I think that's a good reminder.
19:13It's a long-term asset class, right?
19:14VCP is a long-term asset class.
19:16We're looking at five to seven, ten-year periods rather than a quarter or a daily swing in price.
19:22Jaja, how about the U.S. perspective?
19:24Any sectors, regions you're excited about in terms of innovation, capital markets, or companies that you're seeing?
19:31Yeah, I would say that if you look at Europe as a whole, the Nordics, UK, France probably lead.
19:39I think it's kind of undeniable.
19:42But I think the broader perspective that we have is that talent is universal, but distribution is not universal.
19:50And so if you're a European company that's looking to get us or anyone else that's an American investor,
19:57I think that the number one key thing to think about is how are you guys going to be able
20:01to distribute in the U.S.
20:03and really be able to scale in the U.S.
20:05Because ultimately, we do think that's how you're going to build a really, really large business over time
20:11is the ability to really win in the U.S. markets.
20:14And that's definitely, I think, above all, the factor that we're looking for when we're looking at European investments.
20:24Great.
20:24Great. So moving on to, I guess, the alternatives angle with regard to exits.
20:31Now, Henry, you mentioned a few alternative routes earlier, secondaries.
20:34The main ones we track are kind of buyouts, listing, corporate acquisitions,
20:38those are the traditional ones in the primary markets.
20:41We've also got continuation vehicles, secondaries, GP-led, LP-led, founder buyouts, tender office SPACs, DPOs,
20:47all these different types of transactions that might generate some form of liquidity for these companies.
20:52What do you think about all these alternative liquidity options?
20:57You mentioned you're pretty positive on the secondary market.
20:59Do you think that's here to stay?
21:00Do you think that's a long-term strategy?
21:03Or do you think there will be a return to more traditional IPOs in the future?
21:08I think IPO will still always be there for a company reaching a certain size.
21:13It's always a pretty good endgame, especially for companies, tech companies in Asia and Europe.
21:19Because, sorry, Asia and the U.S.
21:22These two markets have a very, very mature closed loop from early stage investors to, like, VC stage, to growth
21:28stage,
21:29and to capital markets, it's like a closed loop, and every stage investor can find their angles and find a
21:34way to exit.
21:35I think what European market is missing, I think, to JD's point earlier,
21:41is you're missing a lot of the growth stage or late stage investors.
21:45And also, you don't have a very good value for IPO.
21:48So once you reach a certain stage as a tech company, your best exit option is probably go to the
21:53U.S.
21:53That's why I judge his point, right, whether you can make it in the U.S.
21:58But what if Europe can develop a very good capital market here, whether it's Paris, Frankfurt, or London,
22:05and making this to be the exit market for investors?
22:09And that's going to be very interesting, I think, something we're looking for, for European tech companies.
22:15Without that being the case, I think you need a very liquid private secondary market.
22:20For those companies that haven't been listed, I think all the early stage investors and us being a growth stage
22:25investor
22:26should be able to find a way to exit.
22:29And there's a lot of room that the technology can play in this, because a lot of that is information
22:33gap.
22:34I think Pitchable is one of the key players in the sector by basically it's all data, right?
22:40Because this is not listed companies.
22:42It's not, information is not very transparent.
22:44It's not publicly available.
22:46It's all private.
22:47But so right now, the way we exit our secondaries, we're sourcing our secondaries to individual brokers and advisors, FAs.
22:55There's a lot of kind of pricing gaps.
22:57There's a lot of information dysymmetry there.
23:00But this can be solved by using technology, right?
23:03So what if, you know, one of the founders sitting in the audience can come up with a solution?
23:08I think that would be another good solution to that.
23:11Great.
23:12Thank you for the kind words about Pitchbook.
23:13JD, anything to add on the secondaries market or alternative liquidity solutions?
23:18I'd like to thank Henry for a very decent answer to your question, because that's all there is.
23:23There's equity.
23:25Perhaps secondary, indeed, because you've got plenty of people who get stuck too long, business angels, employees, funds that need
23:33to liquidate.
23:33For the rest of it, whether it's back at one point, what we call continuation funds right now, honestly, it's
23:41a lot of bullshit.
23:42The thing is, I understand a continuation vehicle, which is meant to say, hey, guys, this was the life of
23:49the fund.
23:49It's 10 years.
23:50We're returning the money.
23:51But we've got this share.
23:53It's too bad.
23:54We won't exploit it.
23:55And guess what?
23:55We won't take any fees, but we're going to go to the end of it.
23:59We'll provide you a new alternative.
24:01What's being done right now to say, well, we've been long.
24:04Let's do our own valuation, transfer it.
24:06My first point, which is we took a too high valuation to say bullshit to LPs.
24:11That's going to be the same.
24:12Our industry is extremely smart when there's too much pressure to create dumbass money and products.
24:18I think right now, our business is as simple as ever.
24:21You create a company.
24:22You grow it.
24:23You finance it with equity.
24:24It's healthy.
24:25It has a potential to go public.
24:27It's great.
24:28It's got a potential for private equity because at some point, any company needs to become profitable and reliable and
24:34last.
24:34Or it can be acquired strategically.
24:36And that's great.
24:37That happens.
24:38Otherwise, yeah, you're in a bit of a rough spot.
24:41And what I'd be pushing for right now is we're a lot of investors around the table.
24:45We're all working on the same companies.
24:47We know the recipe.
24:48It's not to say it's great.
24:49You should try that.
24:50It's to say, well, you've been trying.
24:52Let's make the company profitable and see who would make sense of the asset.
24:57So honestly, in a time of a lot of mixed messages, and it's very hard to know if we're in
25:02a bubble or not, if things are working or not.
25:04I think going back to simple senses, companies grow.
25:08They grow profitable.
25:10They go public.
25:11They go private but buy out.
25:13It's that simple.
25:14And people are too long in a company.
25:15Secondary market is important because the cap tables need to live.
25:19For the rest, I already know.
25:23Great.
25:24And Jaja, anything to add on the alternative liquidity solutions?
25:27Yeah.
25:27I think also looking at it from U.S. early stage VC, I think that a few years ago, you
25:35would never have a few seed fund managers sitting around talking about secondaries.
25:40It was just, like, not something that people – it was top of mind for people, honestly.
25:44But now, more and more so, the conversation is around, like, you know, we bought it now at the seed
25:49or pre-seed.
25:50Now this company is at a series C.
25:53Should we try to sell 100 percent, 50 percent, just get the principal back?
25:58Like, that's actually a real conversation that I think seed managers are actually considering now.
26:05I think, like, five years ago, people were just like, let's just huddle until, you know, the exit.
26:10But now we realize that, okay, maybe the exits are, like, much fewer than before.
26:16And so we need to take the chance to exit at least some while we have the opportunity to do
26:23so.
26:24And so that's kind of a very, very relevant conversation topic that I think a lot of funds didn't go
26:32through over Zerp and before.
26:36And just going back to our kind of U.S. versus Europe kind of discussion as well, like, what is
26:41your take on European companies exiting in the U.S.
26:44and listing in the U.S.?
26:45Like, I think I saw in the news WISE is moving its primary listing to the U.S.
26:48Klarna is going to, when it does, list in the U.S.
26:51Deliveroo listed on the LSE but is now being taken private only four years later, and that was a darling
26:57of the U.K. ecosystem.
26:58What is your take on European companies listing in the U.S. just generally?
27:02I mean, I think that for a long time that was pretty much the – probably the best, you know,
27:09scenario for a lot of these European companies.
27:11But as Henry said, maybe things are going to change in the next, you know, decade or so.
27:16I think that it seems like the U.S., you know, public markets still ultimately favor kind of homegrown, you
27:26know, companies.
27:29And so I think it's going to take a few more exits and examples, like Klarna, that I think is
27:37going to be very big for the European ecosystem to prove this point out.
27:40But ultimately, I think it's – I feel pretty optimistic because good companies, you know, with their fundamentals, good growth
27:47rates can be grown anywhere.
27:48And I think that they'll be awarded in the exit sense.
27:53Nice. Great.
27:54Okay.
27:55We've got seven minutes left.
27:56So let's flip the lens forward now.
27:58So we'll look at kind of outlooks and a forward-looking perspective.
28:01So our research, we did, like, an IPO window analysis early this year or last year.
28:06We updated it in January, and there's been a lot of changes since because of the tariffs.
28:11And we've, you know, run the calculations on valuations, volatility, when the window is going to be great again.
28:15It's moved from this summer to basically the first half of next year.
28:21So, Henry, to you, what is your outlook for exits?
28:24Do you think it will take until H1 next year to get better, or will it come sooner, do you
28:28think?
28:30I have a lot of things I don't agree with President Trump, but I think – I do feel like
28:34there's a need, urgent need to cut rates.
28:37And I think just before this panel, I think the inflation rate for the month of June actually came up
28:44pretty nicely, well below expectations.
28:47I think expectations is, you know, there will be at least two cuts this year.
28:52There will be a few more cuts early, first off, next year.
28:55So, fingers crossed, if that's the case, I think Q1 next year, we'll see some IPO coming back to the
29:01market.
29:02Obviously, we don't have a crystal ball, but I think that's what people have been hoping, at least from people
29:07in our industry.
29:09Edie?
29:10I'm not very good at liquid markets, so IPO is hard to predict.
29:14And as Henry said, what do I know about American policy?
29:19But here again, why do we struggle figuring out how companies are going to exit?
29:24There are people struggling right now.
29:26They're called LBO funds.
29:27They used to invest at 25 times the ABDA because, you know what, that was for free.
29:33Three years ago, that went up to 8%, 12%, and now it's difficult again.
29:38They're looking for assets, and that's their job.
29:41Their job is to find very stable assets, growing, help them reach another stage, and consolidate.
29:48Because people forget.
29:49I mean, I've been in this industry for the past 12 years, and it's a food chain.
29:53I was at the beginning trying to find a great company scaling, and now I'm just trying to return money
29:57to my investors
29:58and make sure that I'll fund the next companies.
30:00And you know what?
30:01Here's the story.
30:02You have an idea.
30:03Create a company.
30:04It's innovative, and it's great, and you've got T-shirts, and you've got events, but at some point, you've got
30:10customers.
30:11You grow.
30:12You're asking for more money.
30:13But there's going to be a point where you've got to figure out why we do all this.
30:17Whether it's to have an international company or a local company, what you want to have is a company able
30:22to pay their employees,
30:23generate profitability, and at some point to say, I've done this, and it's going to last forever.
30:28It can last because it's funded privately, and it grows, and it generates profits, and it can leverage.
30:35It's indefinite because it's been acquired by Google, whoever.
30:39The point is, right now, there's a lot of money from tech companies, Googles and the likes,
30:45key companies trying to figure out what are the next companies that build software that generate profits,
30:52are going to be, and how far are they going to be to bring them out.
30:57So the point is, there's a lot of exits.
31:00It's just the methods to go towards that is narrow.
31:05It's building a company at some point, making sense out of it, doing where your value is.
31:10If you build great tech, but it's not profitable, it's okay.
31:12You've got great tech.
31:13You can sell it.
31:14If you are profitable, or if you see how it can be, you can raise funds, and at some point,
31:19it will make sense.
31:20It's a food chain.
31:22You create small fishes, they come big.
31:24No matter what, at some point, they'll get fished and gutted out, or go to bigger oceans.
31:30And that's the great news of our business.
31:32We build companies that last.
31:33So pretty confident we've got great tech.
31:36AI is going to make the companies more profitable.
31:38You'll have less engineers to build tech.
31:41You'll have more opportunities to sell to your customers.
31:43I think it's going to do fine.
31:45All we have to do is remember why we're doing this, to create companies that last.
31:53And Jarja, what's your take on the exit outlook in the next six to 12 months?
31:57Excited?
31:58Nervous?
31:59Neutral?
32:00Well, I pretty much agree with the IPO markets.
32:03I do think that maybe Q4, if we're lucky, and it's really going to depend on rates, but I also
32:12think that I'm sure everyone saw yesterday in the news how scale got that 18-bill cash out by Meta.
32:24And I think that's a really creative way for Meta to basically acquire scale, right?
32:30And so, you know, I think looking at a lot of these antitrust problems we've had in the U.S.
32:36over the past few years, like, we're going to see more situations like that, being more creative as to, like,
32:42how we can manufacture a lot of these exits.
32:46And companies like Meta, Google, Microsoft are really leaning in, especially if there's some kind of strategic AI component to
32:53it.
32:54And so, I'm pretty optimistic, you know, even outside of IPOs, like, we're going to see a lot more M
32:58&A activity happening, such as a scale example in the U.S.
33:04Okay, great.
33:05We've got just under two minutes left.
33:07Any final thoughts, Henry or JD, on the IPO outlook or general exit outlook?
33:13I think Meta overpaid for scale, because I DD them.
33:18We haven't got enough time to discuss that.
33:20I don't know if we do.
33:21Any thoughts on that transaction, JD?
33:23I think it's what's great, actually.
33:25You're seeing huge acquisitions on Meta, on Google acquiring Waze.
33:30We've seen in the past few months the resumption of big acquisitions.
33:35So, technically, yeah, it's an acquisitive market and it's growing.
33:40So, quite positive.
33:42Yeah, and on that note, I mean, going back to our data, like, the majority of exit count that we
33:46see is from buyouts and acquisitions.
33:48The very small proportion is actually listings, but the value is generated from listings, and that's taken place over the
33:53past 10 years.
33:53So, as private markets go, kind of majority are going to be those transactions.
33:58There's a lot more smaller ones in there, and they may not grab the headlines, but the IPOs are the
34:02ones that, you know, are the biggest ones that grab the headlines and generate, I guess, noise.
34:07With that, I'd like to thank our panellists.
34:09We're just at time, so thank you very much for joining us, and thank you for those insights.
34:13Thank you.
34:13Thank you.
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